Currency Highlights | August 2019
20.08.2019
Yen supported by two huge uncertainties, USDJPY downtrend may extend.

CURRENCY HIGHLIGHTS – August 2019

 

EUR/USD

The EUR/USD pair continues to move down. Thus, on Monday, it is recommended to continue to remain in shorts for the euro/dollar pair with a target of 1.1037 (tomorrow this target will be specified). The bearish mood in the market remains, but the reversal of the MACD indicator will indicate a round of corrective movement. Buying the euro is now impractical, there are no signs of the completion of a downward trend. In addition to the technical picture, fundamental data and the time of their release should also be taken into account.

Furthermore, the cautious tone is expected to gather traction among EUR investors in response to the potential announcements of some kind of easing measures by the ECB, either at this month’s meeting or the September one. At this point, market chatter commenced to mull the idea of a 10 bps rate cut to the deposit rate and the restart of the QE programme, along with changes in the forward guidance.

 

USD/JPY

Yen Supported by Two Huge Uncertainties, USDJPY Downtrend May Extend.

The Japanese Yen has headed into a new calendar quarter on a high note, with its customary haven role underscoring demand which has brought USD/JPY down to its 2019 lows.

The currency has been supported by a range of economic uncertainties, of which two loom the largest. The first is the ongoing trade dispute between the US and China. There has been some cooling of rhetoric on this subject from both sides as May has slipped into June. A durable settlement clearly remains elusive, but any headlines suggesting that such an end is being actively and amicably sought could well see risk appetite revive, probably to the detriment of the Yen.

Bank of Japan Governor Haruhiko Kuroda started the week by saying the country’s economy was expected to expand moderately as a trend and gradually push inflation toward the central bank’s 2% target.

 

GBP/USD

Sterling has nudged higher over the week, aided principally by slightly better-than-expected wages, jobs and retail sales data. UK inflation also edged higher and in a world without Brexit, these releases would have the Bank of England discussing whether the current monetary policy was appropriate or if it needed to be tightened. However, as has been the case for many, many months, Brexit is still the driver for Sterling and will remain so until October 31.

Next week there is no market moving hard UK data of note, leaving Sterling at risk of Brexit rumors and news flow. The UK market will also be holiday-thinned next week, leaving GBP potentially exposed to outsized moves in limited liquidity markets.

Brexit news flow continues unabated with the latest batch of headlines suggesting that a cross-party alliance of MPs may come together to form a national unity party if UK PM Boris Johnson loses the expected vote of no-confidence likely to be called in early September. The current Labour Party leader has said that he will act as interim PM is this succeeds ahead of an early general election with the Labour Party promising a second referendum. According to reports, four prominent remainer Conservative MPs are involved in talks with Corbyn.

Sterling technical are covered in a different section but the chart below shows a familiar pattern. Since late-April there have been three occasions when moves lower are met with a quick reversal before the overall bearish pattern takes over. 

 

GOLD

As clearly explained last month, gold price was on rally.

Gold remains bid and underpinned around current levels and is looking for the next bullish impulse to send it through its recent multi-year high. Risk sentiment, one of gold’s main drivers, remains with US-China trade talks still not confirmed, while in Hong Kong, mass protests continue, and these may well be a hot topic of discussion between the US and China. On Wednesday the latest FOMC minutes, while on Friday, Federal Reserve Chairman Jerome Powell will speak at the Jackson Hole Symposium and he may well give further insights into the central bank’s thinking around the next round of US interest rate cuts. Any hint of that the Fed wants to get ahead of the curve and cut rates aggressively will push gold higher.

The daily gold chart suggest further short-term consolidation as the market unwinds its recent heavily overbought bias. There are a few recent lows between $1,487/oz. and $1,503/oz. that will support gold in the case of any sell-off, while to the upside, $1,520/oz. before $1,528/oz. and $1.535/oz. If this latter level is broken and closed above, then $1,540/oz. is the next upside target.

We believe Gold is setting up for an upside breakout move after breaking predicted targets above $1450.

 

BITCOIN and ALTCOINS

Since our recent BTC analysis, after Bitcoin has stabilized in a range between $10200 and $11800. Most of altcoins dropped slightly against Bitcoin who remains the absolute king of digital assets in the moment. Many other players are also entering blockchain and crypto field and the future of money is digital for sure. Institutional investors are investing 200-500 million dollars weekly. The general sentiment in the crypto market is very positive and as said many times already, we expect a huge breakout of cryptocurrency.

 

 

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